Boehner debt ceiling plan may not avoid downgrade of US credit rating

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Many on the GOP side of the debt ceiling debate have claimed that President Obama's wish for a "grand bargain " has more to do with the 2012 elections than with the debt ceiling itself. Problem is that may not be true. Credit agencies at Standard and Poor may lower the nation's credit rating if a "grand bargain" is not reached.

While at the end of the day Boehner understands what is about to happen I don't think that he can get his GOP/Tea Party Caucus to go along. The Tea Party freshman and the stupid pledges they signed are going to be a huge problem. Why would you sign something that hurts your ability to do your job. It would be like a surgeon signing a pledge not to use a scalpel or a mechanic siging on not to use a certain type of wrench.

[ From the Huffington Post ] According to Wall Street sources for CNN's Erin Burnett the newest Republican plan would not satisfy the credit rating agencies, which have soured on the idea of a short-term solution to the debt ceiling debate. Rather, it was Senate Majority Leader Harry Reid's approach (padded by counting the savings from the drawdown of troops from Afghanistan and Iraq) that would calm their nerves.

"I think it is important to emphasize that most people think both of the plans are really Band-Aids and don't deal in any significant way with the spending and cost issues in the country," Burnett said. "The issue was that Speaker Boehner's plan does not cut enough spending right away. Harry Reid's plan would cut about $2.7 trillion. Just because it is bigger than Speaker Boehner's plan is really the reason the Boehner plan may still trigger a downgrade."

"Really interesting this afternoon, when I was talking to an investor who had met with the ratings agencies at Standard & Poor, talking about the potential of a downgrade -- which by the way could raise interest rates the same way a potential default could -- and they said the Boehner plan probably wouldn't hit the hurdle to prevent a downgrade," she added. "Even if that deal was reached, you could still get a downgrade. It is unclear whether that would happen for sure, but that would be a real possibility. Whereas the Reid plan, even though a lot of the parts of that are seen by many as gimmicks, probably would pass that hurdle and you wouldn't get that immediate downgrade. That's an interesting distinction."

Could this be a major factor in ongoing negotiations? In a sane world it would have to be but with the Tea Party freshman you just never know. Let's hope that the adults in the room Boehner/Cantor can talk some sense into them. George Cook AAreports.com